During the first few months of 2025, emerging markets are seeing a shift in capital flows, increasing M&A activity, and a stronger focus on efficiency. India’s IPO market took global lead in 2024, Brazil is seeing more strategic acquisitions, and AI-driven innovation is reshaping fintech. At VEF, these trends are shaping our portfolio and recent exits. Hear more from our CIO, Alexis Koumoudos.
Which emerging markets are currently seeing the most startup activity and investment?
India remains the most dynamic market, benefiting from a strong IPO wave in 2024 that injected fresh capital and reinforced investor confidence. Public listings have created a positive cycle—investors gain liquidity, confidence rises, and early-stage startups secure funding. While investors are more selective, high-quality companies continue to attract capital. Brazil follows closely, with M&A activity picking up as incumbents acquire startups at more rational valuations, even as broader investment activity remains measured. In both Brazil and Mexico, VCs are deploying capital selectively at lower, more sustainable valuations, fostering a healthier funding environment. Across markets, investors are shifting from aggressive expansion to a more disciplined, fundamentals-driven approach, strengthening long-term value creation.
Which emerging market unicorns are setting the stage for future innovation?
Tech-savvy companies implementing AI from the outset are driving significant efficiency gains. We see in our portfolio how AI enables companies to increase revenue by up to 50% without expanding engineering teams, while AI-driven sales agents in B2C and B2B are automating outreach and reducing costs. In customer support, Juspay uses AI to cut response times from 24 hours to 10 minutes. At the same time, embedded finance is reshaping business models, integrating financial services into non-financial platforms to create new revenue streams and enhance user engagement. Gringo, for example, helps drivers manage vehicle documents while embedding insurance and credit, solving industry-specific challenges rather than operating as a standalone fintech.
What exit strategies are currently most viable for startups and scale-ups?
Our three recent exits reflect a market where profitability and sustainable valuations are more critical than ever. BlackBuck’s IPO in India demonstrated that well-positioned companies with solid fundamentals can still perform in public markets. The acquisition of Gringo by Corpay in Brazil highlights how M&A is playing a larger role, particularly where IPOs remain limited. At Juspay, we took a partial exit while retaining a board seat, ensuring long-term engagement with a high-growth company. While exits are gaining momentum, macroeconomic risks persist, with currency volatility and geopolitical uncertainty—especially in Brazil and Mexico—shaping investor sentiment. Public markets remain valuation-sensitive, particularly for later-stage companies, while growth-stage funding is more selective. For investors like VEF, this environment presents both challenges and opportunities—backing resilient businesses that can navigate cycles and sustain long-term value creation.
In our next piece, we’ll explore more aspects of how investing in emerging markets evolves.